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Refinancing your home loan to pay for a holiday

Rates and fees last updated on

How to refinance your mortgage for travel

Home Loan Tip

While funding a holiday may not be the most traditional motivation to refinance your mortgage, some borrowers consider refinancing at a lower rate to help manage their holiday debt.

If you're planning to take a personal loan to cover the expense of a holiday, one option is to refinance your home loan at a lower rate and use the cost-savings to help cover the cost of a trip. However, this should be carefully considered because failing to plan how you'll repay the holiday debt after it's rolled into your mortgage can increase your interest charges and repayments.

Keep in mind that adding holiday or car debt to your mortgage can put your home at increased risk and it can also harm your refinance application.

Let's look at the below example to understand the risks of refinancing to help manage travel debt.

Dan and Emma’s trip to ThailandRefinancing for holiday travel case study

Dan and Emma have a $400,000 home loan and through their efforts over the last five years, they now owe $360,000. With an interest rate of 5.5%, their repayments are $2,456.35 per month.

Dan and Emma haven't been overseas for years, so they decide to book an extended trip to Thailand for $20,000. With a lack of savings to fund the trip, they're thinking about refinancing with another lender for a 20-year home loan with a lower interest rate of 5.25%. They also consider increasing the loan amount to $390,000 and adding an extra $10,000 to help fund a future renovation.

The new home loan, even with the lower interest rate would increase their monthly repayments to $2,627.99. Due to the total interest charges, this would turn their $20,000 holiday and $10,000 for additional purchases into a combined debt of $48,516.

Dan and Emma decide to speak to a financial planner and a mortgage broker before going ahead with the refinance.

Refinancing the right way

If you're thinking of switching lenders to fund a holiday, make sure you only borrow the amount that you need for the trip. For instance, in the case study above, if Dan and Emma started a repayment schedule and borrowed only the amount they needed for the trip (and didn't get tempted to borrow extra for the renovation), then the refinance could have made financial sense.

If they refinanced to $380,000 at 5.25% for 20 years, this would make their repayments $2,560.61 a month - just over $100 more than their regular repayments.

At 5.25% for 20 years the $20,000 amount would cost $12,344.52 in interest with lower monthly repayments of $134.77.

If Dan and Emma had borrowed the $20,000 at personal loan rates of say 14.5% over five years this would cost them $8,234 in interest, with repayments of $471 a month.

If Dan and Emma added this $471 a month to their loan repayments, this would mean it would take them four years to pay off this amount and would cost them $2,105.05 in interest.

$471 a month is a lot of money, especially if they are already paying a mortgage.

Say they instead added approximately $300 onto their loan per month ($75 a week), this would add only $3,780.04 in interest to the loan and would take the couple a touch under seven years to pay off.

What to watch out for

Keep in mind this example doesn't include the property value of Dan and Emma's home, so the important role equity has in refinancing shouldn't be overlooked.

It's important to note that some lenders will automatically set your new refinanced loan to a new 25 or 30 year loan. If you've paid your loan down then you may want to consider the effect this will have on the overall interest you'll pay.

Watch the video below by Heidi Armstrong of State Custodians Mortgage Company to find out more.

Refinancing home loan options

Rates last updated May 29th, 2017
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time 2 year fixed rate for owner occupiers. Conditions apply.
3.64% 4.83% $0 $0 p.a. 95% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.48% $0 $375 p.a. 85% Go to site More info
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A low-interest rate loan suited for purchases and refinances with no application or ongoing fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - Special LVR <=80% (Owner Occupier and Principal & Interest only)
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.84% 3.89% $445 $0 p.a. 80% Go to site More info
Aussie Optimizer Variable Rate - LVR <= 80% (Owner Occupier + P&I)
No application or ongoing fees and fee free extra repayments.
3.86% 3.87% $0 $0 p.a. 80% Enquire now More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.83% 3.83% $0 $0 p.a. 70% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.84% 4.22% $0 $395 p.a. 95% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.85% 3.90% $0 $0 p.a. 90% Go to site More info
State Custodians Low Rate LOC - LVR up to 80% (Owner Occupier)
No application fee and competitive interest rate to access the equity in your home.
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
3.59% 4.03% $500 $0 p.a. 95% Go to site More info
Community First Fixed Home Loan - 3 Years Fixed Owner Occupier special offer (New Loans only)
A limited time fixed rate special with no monthly or annual fees plus a 100% offset account.
3.69% 4.93% $600 $0 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.84% 4.71% $600 $0 p.a. 95% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
State Custodians Low Rate LOC - LVR 80% to 90% (Owner Occupier)
Borrow up to 90% property value and pay no application fee.
3.79% 3.82% $0 $0 p.a. 90% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.89% 3.89% $0 $0 p.a. 110% Go to site More info
SCU Basic Variable Rate Home Loan
A basic home loan with a low interest rate and a redraw facility available. Take out a new SCU loan and enjoy $500 cash back on loans above $150k, terms and conditions apply.
3.77% 3.81% $200 $0 p.a. 95% Go to site More info
Bank Of Queensland Economy Home Loan - Variable (Owner Occupier)
A basic home loan with additional repayment options.
3.89% 4.04% $300 $10 monthly ($120 p.a.) 95% Go to site More info
QT Mutual Bank Mortgage Saver Home Loan
A low rate home loan with no application or ongoing fees. Note that to be eligible for this loan you must be QLD resident.
3.95% 3.95% $0 $0 p.a. 95% Go to site More info
SCU My Life Fixed Rate Home Loan Package - 3 Years
Enjoy the same interest rate for 3 years fixed and borrow up to 95% LVR. Enjoy $500 cash back on new loans above $150k, terms and conditions apply.
3.69% 4.00% $0 $350 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. NAB Rewards Points offer available, terms and conditions apply.
3.88% 4.95% $0 $395 p.a. 95% Go to site More info
CUA Fresh Start Basic Variable Home Loan - Owner Occupier
A basic mortgage with flexible repayments options.
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
Heritage Bank Discount Variable Home Loan - Special Rate Offer (Owner Occupier) New Customers Only
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.74% 4.74% $0 $0 p.a. 95% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.99% 3.99% $0 $0 p.a. 85% Go to site More info
Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate Discount Rate $150k+ <80% LVR (Owner Occupier, P&I)
Special offer for new lending of $150k or more & under 80% LVR, this offer has been extended.
3.79% 4.44% $300 $10 monthly ($120 p.a.) 80% Go to site More info
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
ME Basic Home Loan - LVR <=80% Owner Occupier
A low variable rate loan with no application or ongoing fees.
4.09% 4.11% $0 $0 p.a. 80% Go to site More info
UBank UHomeLoan - 3 Year Fixed Rate (Investor)
Pay no ongoing fees on this investment loan fixed for 3 years.
4.09% 4.46% $395 $0 p.a. 80% Go to site More info
UBank UHomeLoan Variable Rate - Real Reward Offer (Owner Occupier Interest Only)
A home loan with a competitive variable rate and no bank fees.
4.13% 4.13% $0 $0 p.a. 80% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. NAB Rewards Points offer available, terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
100% offset account, unrestricted additional repayments and no monthly account keeping fees
4.19% 4.19% $0 $0 p.a. 90% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
4.19% 4.82% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
4.34% 4.96% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Standard Rate, P&I)
Get a short term fixed rate for that investment property with no application or ongoing fees.
4.34% 5.02% $0 $0 p.a. 95% Go to site More info
ANZ Simplicity PLUS Home Loan - Special Offer (Owner Occupier, P&I)
Enjoy a home loan with no application fee or ongoing fee.
4.03% 4.07% $0 $0 p.a. 95% Enquire now More info
3.88% 3.89% $600 $0 p.a. 90% Enquire now More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.88% 3.89% $0 $0 p.a. 95% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 5.01% $0 $395 p.a. 95% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.04% $0 $395 p.a. 95% Enquire now More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years, P&I
A low interest rate home loan and competitive two year fixed rate.
3.88% 4.94% $0 $395 p.a. 95% Enquire now More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier)
A variable rate home loan with competitive interest rate and flexible product features that can earn Velocity points.
3.79% 3.92% $0 $10 monthly ($120 p.a.) 80% Enquire now More info

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Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)

A fixed rate package loan with flexible repayments options. NAB Rewards Points offer available, terms and conditions apply.

IMB Budget Home Loan - LVR <=90% (Owner Occupier)

A competitive budget rate without any unwanted bells and whistles.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

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